Procrastinator's Guide To Bill Payment

Paying your bills on time is an important aspect of taking control of your financial life. Knowing when your bills are due and making a habit of paying them on time can reduce your stress, save you money, boost your credit score and enable you to get lower-interest credit in the future.

But how do you start making on-time bill paying a habit? It's easier than you may think.

Ways to Prevent Late PaymentsWe've come up with a list of 10 top tips to help you stop paying your bills late. Let's take a look:

Sign up for auto-pay. Most of your regularly recurring bills (ex. utility bills, mortgage, car loan, etc.) provide you with the option of having the amount you owe automatically deducted from a designated bank account. Make it easy - make it automatic.

Use financial software with automatic bill-paying reminders. Both Microsoft Money and Quicken have features that can prompt you days or weeks in advance of your bill due dates.

Consolidate bills. Say you get your internet access, phone service and cable TV from the same provider. Instead of paying three separate monthly bills, why not check to see if you can consolidate your billing to pay for all of the services you receive in one monthly statement? You'll be less likely to miss a due date that way.

Schedule bill-paying time. Carve out time on your calendar to pay bills on a regular basis in the same way that you schedule time for the gym or for work meetings. By setting aside a regular time to pay your bills, you'll create a habit that will make it much less likely for you to miss a due date.

Create a bill-paying location. Stuffing a bill into your purse or briefcase, or throwing it on the kitchen counter when you come in from work, is a good way to forget (and miss) the payment due date. Think about a convenient place where you can keep and pay your bills. Stock it with all of the items you need to pay your bills, including a computer and internet access (if you pay bills online and/or use financial software), your checkbook, stamps, pens, envelopes and a filing system to keep track of your paid statements. Then when it's time to pay your bills you'll have a comfortable, convenient place to do so.

Organize bills. Your bills should be arranged according to due date and note due dates on your calendar. Create a habit of noting the due date for a bill as soon as you open it (circling or highlighting it) and then putting the due date on your calendar. You may want a desk filing system where you can store bills according to due dates so you have an immediate visual reminder of which bills need to be paid next.

Give your payment time to arrive. Check your statement or contact your creditors to find out how many days in advance they recommend sending in payment. It's important to know how long it will take for your creditor to actually receive and process payment, especially if you are sending in payment around a holiday or weekend. You want to meet or beat the deadline, not get the check in a day or two late.

Learn your bill cycle. Review several months' worth of paid bill statements and list bills in the order that they are typically due. Most likely you'll notice that your bill due dates fall into two groups - ones due earlier in the month (e.g., the 5th) and ones due later in the month (ex. the 20th). As soon as you receive your paycheck, pay the bills that are due prior to your next paycheck. If you don't have enough money in your account to regularly pay all of the bills due before your next paycheck, contact your creditors to change a couple of your payment due dates.

Sign up to receive bills or bill reminders by email. Use email to your advantage. Check to see if your creditors provide online bill payment reminder features, or go "paperless" and have your bills sent to you electronically via email. When you receive the bill or reminder, use it as a prompt to log into your bank account and pay the bill, ensuring that you don't miss the due date.

Pay by phone. Many creditors allow account holders to pay their bills by phone, for free or a small fee. If you regularly pay bills late, consider paying by phone instead - more than likely the fee charged for phone payment service will be less than the potential late fee.

Bonus Tip

Prepay bills. If you have a really hard time making your payments on time, you might want to consider prepaying your bills to avoid those punishing late fees. Many creditors will allow you to pay your bills in advance, effectively creating a "credit". If you have irregular income, or if you find that you have some surplus cash, consider prepaying one or more of your recurring bills and you won't have to worry about payment due dates for a few months. Just keep an eye on your monthly statements to know when you need to begin paying again.

Why It MattersThere are several important reasons why paying your bills on time matters. It helps you establish a good credit record and canboost your credit score. When you pay your bills on time, creditors report your good payment habits to the three main credit bureaus - Experian, TransUnion and Equifax. The more consistently you pay your bills on time, the higher your credit score is likely to be. Prospective creditors use your credit report and credit score to determine whether to approve your application, how much credit to extend (i.e., mortgage loan amount or line of credit) and how much interest to charge you. The better your record and the higher your score, the more likely your future applications for credit are to be approved, and at a lower interest rate. (For related reading, see Consumer Credit Report: What's On It andFive Keys To Unlocking A Better Credit Score.)

Not only will paying your bills on time help your credit score, but it also will save you money. In addition to getting lower interest rates on your credit accounts, when you pay your bills on time you will not be charged a late fee or penalty which can range between $25 and $50. You also won't have to worry about triggering an interest rate hike. Check the fine print, particularly on your credit card agreements, and you will likely find that the company reserves the right to hike your interest rate considerably (ex. from 2.9% to more than 20%!) for making even one late payment. And if the interest on your account is calculated daily, the sooner you make payment the less interest you'll have to pay. (For the grisly details, check out Understanding Credit Card Interest.)

Small Steps, Big PayoffPaying your bills on time can reduce your financial stress. No more wondering if you've paid a bill, if you have enough money to cover the amount due (because you have other bills due as well), or how much you'll have to pay in late payment fees. You can rest easy knowing that your "financial house" is in order.